Comparing Recession Job Losses as % of Employment

Comparing Percentage Job Losses, post WW2

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

I think the third chart from CR is fear-inducing. Most of us who invest already know about “jobless recoveries” but look at the slope of recovery of the 1990, 2001, and current recession/great recession. The “bounce back” in jobs is at a turtle’s pace.

i hear ya bruce- that 2nd chart has such a huge divergence- it just caught my attention- i alluded to a two decade recovery in jobs in my 8:46 post- so i’m with you on that observation-

along the same vein- for your enjoyment- from ZH-

“Wall Street knows too well it has at best 2 years to collect on bonuses, and option incentives for massively mispriced underlying stocks, before everything eventually comes crashing down. And when it does, everyone will take off in their Textron made jets to live happily ever after on some quiet Pacific Island, far from the pitchfork armed crowd of what was formerly the American middle class”

I think you dropped your [irony/] tagset … you do know that having the unemployment ranks increase by (considerably) over 200,000 means that the “bounce back” is negative — espcially with something on the order of a half-million new jobs being needed to maintain position.

We are a long way from hitting bottom. Even when we are creating jobs at that same rate that we lost them at last month, we will still be losing ground at a good clip.

ps — I know that you know this, my comment is for others reading this blog who may not be so well-informed.

Without strong unions the employers use a downturn to weaken wages. That takes consumption down further, destroying more jobs, feeding the recession and weakening the economy. Reagan did a lot more damage than just kicking the mentally ill out of hospitals and onto the streets. He planted a cancer in our free market capitalist system, and for every cycle it gets sicker and sicker.

But if you add new debt to eliminate unsold goods, you get
Profit = (Revenue + New Debt) – wage costs.

Rather than increased wages accounting for increase in the aggregate supply/demand ratio, debt replaces both unsold goods and the need for increased spending on wages, thus dramatically improving profits.

It is this circular reliance upon debt instead of wage increases that fuels the debt bubble – and with the massive employment losses of the current Great Recession, increased wages have been virtually eliminated from the equation as a means to stimulate aggregate demand.

We are left with two choices: inflate a new debt bubble or restructure the very nature of our businesses with less profit percentages and increased sharing with labor of productivity gains. It is in the sharing of productivity growth and in maintaining a stable ratio between productivity and wages that ensures long-term economic health.

Todd Harrison over at Minyanville has made the case that a good forecast looks at the fundamentals, the trend issues, the present psychology of the market, and any structural changes in the market. When you see an outlier trend line like this (jobs) it immediately brings to mind that the comparison periods may not be appropriate. It suggests that what wave principle calls the “degree of trend” of current trends may be part of a correction larger than the periods used for comparison. Of course this is just one outlier statistic but then, there’ s a bunch of them lately (?). Back then, to basics: Securitization is broken down and not coming back online in any meaningful way soon. That single reality means that tons of debt must be revalued or no one will truly trust the system until it does but, we also believe the government when they tell us that is too scary to consider (for the vested interests that really influence them). If we don’t pull our collective heads out of the moment, then these jobs stats will seem like an endless parade. We have no choice but to account for the bad debts and purge the system no matter how difficult it seems. Otherwise job stats will look worse than Japan’s lost decade. Then again we could all just go to nursing college, right?

“…“degree of trend” of current trends may be part of a correction larger than the periods used for comparison.”

Yes. Recessions make the job-loss picture more noticeable — contrast and recency effect — but job destruction in the US, private sector in particular, is a longer-term trend; e.g., http://tinyurl.com/kmkqw3

Building houses, selling mortgages, and other finance related activity that produced phantom paper profits (i.e. debt based). Also many other service related jobs that were all built on the debt bubble (retail of all sorts, dog walking, hair salons, manicures, you name it), as well as some manufacturing, especially autos that went from 16+ million/yr sales to about 9-10 (also built on the debt bubble). See a trend there?

Lots more of course. But we sent so much manufacturing overseas over the last decade that we’ve hollowed out the job market, especially for those not suited for the “new economy.” We also have increasingly sent white collar jobs like architecture, computer programming and other services, even some medical jobs like radiology (interpreting xrays, etc.) are being done in places like India.

Every time I listen to a program (podcasts) or read an article that address employment and the job market, they always say the same thing. Healthcare, education (and that’s having trouble now too), and government jobs are where they see the growth and job prospects. That’s great for a given individual, but clearly we can’t build an economy on those areas, as essential as they are up to a limit.

I hope you guys are aware that the 2nd and 3rd chart show exactly the same, except the 3rd chart contains more cases.

@Winston Munn:

“We are left with two choices: inflate a new debt bubble…”

Who exactly is “we” who is supposed to have “two choices” here?

A “new debt bubble” implies the old debt bubble has already deflated, but it hasn’t. Household debt has decreased only slightly in Q1 2009. The ratio of total private debt to US GDP was still at about 300%, and the ratio of the fraction of non-financial debt to US GDP at about 180%. It’s very questionable whether the banks will be willing to give out trillions of new loans, if the current debt levels have already been unsustainable. Why would they do this, struck with an increasing number of defaulting debtors and devaluing loans? And then is also the question, whether there will be a sufficient number of new debtors who will be willing to get into (more) debt.

The flow of funds report for Q2 2009 will be released by the Fed on Sep 17. Let’s see what this report is going to say how debt levels have developed. I suspect total debt won’t have changed substantially. Households will have decreased debt, but not dramatically. The decrease will have been about compensated by an further increase in government debt.

As for the alternative:

” … or restructure the very nature of our businesses with less profit percentages and increased sharing with labor of productivity gains. It is in the sharing of productivity growth and in maintaining a stable ratio between productivity and wages that ensures long-term economic health.”

And this choice contradicts the very nature of capitalism. The primary purpose of a private business in capitalism is to make a profit for its owners/investors., but not the welfare of the workforce, general welfare, or “long-term economic health” of society. Businesses that are not profitable enough will just be abandoned, and the investors will look for more profitable investments. If they don’t find these in the country, they will look somewhere else for it.

After all, I would say, over-accumulation of capital and lack of profitability in the producing sector for all the capital (an indicator for this are the decreasing rates of used industrial capacities) that has been looking for profitable investments is one essential cause for diverting more and more investments into financial and speculative sectors in recent decades, for an over-supply of capital making credit cheap, i.e., decreasing market interest rates, and, in turn, encouraging taking on more and more debt up to unsustainable levels to increase profits or for consumption.

@Franklin411 and other pollyannas:
I wonder how can it be that a “recovery” is coming and everything will be just fine in about 2 years with growth rates of GDP first above than at about the potential, like the government has projected in its recent report, if this recession is different to a usual recession, since this crisis is a debt crisis caused by a mountain of unsustainable debt that is still there? And then there is still the question of profitability in the producing sectors.

rootless, if business doesn’t pay it employees well,we know the result is less business for all (after all, one business’s employee is some one else’s customer). and guess where a huge junk of capital comes from ? those same employees, from their pensions and 401k, etc. wipe them out, and that capital is just gone, along with customers. and the result is massive business failures in any country doing business here. but i suspect we are in the great equalization, that being where the US standard of living will fall to what the rest of the world’s is. that been coming for a decade or so. and now its here. we can see the hints in the cuts in employee incomes via salary cuts and reduced hours. thats just the beginning

this is exactly one of the big contradiction immanent to the nature of capitalism around which capital accumulation revolves and why there are cyclical crises of the capital accumulation. The measures businesses take to increase profitability, driven by the forces of competition and providing them with an advantage for the moment against their competitors, bites them in the ass at the end, since these measures make general economic conditions less favorable to realize profits in the markets by limiting demand for the goods produced by the businesses, and, in turn, decrease general profitability.

Winston, you could be right that capitalist have committed accidental hara-kiri because of their stupidity and shortsighted greed. They can no longer pump profits with loans, and cutting wages is like trying to keep from freezing to death by pissing in your pants. This may yet end up being proven to be a bear marked rally. Question is how much of the well deserved pain in the investor class will difuse out and hurt regular people.

Arogersb; no it is a lot easier. We should get back the taxrates of 1961 and prevent the Wall Street banksters and looters from raping American companies. A doubling of the minimum wage and a 100% tax rate on any compensation that exceeds the minimum wage by more than a factor 10 would be a fair first step. We need to ensure that the fruit of increased productivity is fairly distributed, rather than having 120% of it channeled to the top of the investor class. The destruction of America by those gready bastards has to be stopped; if needed by bullets. And yes they can get the hell out of this country, as long as they leave their loot a the doorstep.

Define “faily distributed”. How would you determine what labor is worth? Who should determine this? How would higher wages help aleviate unemployment? What happens to an economy when everyone makes the same amount? Finally, have you been drinking?

skysurfer; defining a fair distribution of the fruits of societies increased productivity is like defining pornography. What is not fair is to have all the wealth increases and then some going to the 10% with the highest income. I would be willing to call it fair when all income groups get a share of the increased wealth even if some individuals got a bigger piece as reward/incentive for special efforts. The average value of labor is the total GDP divided with the total number of hours worked. Lots of different justifications could make someone worth more or less than that average.

The lower end of the income scale is the consumer class (people who spend the wast majority of their income). Personal spending accounts for 70% of our GDP, so the more money the consumer class have the more products has to be produced and the more the economy will grow. You just take this idiotic concept of trickle down economics, turn it upside down (trickle up), and then you have how the world actually works to grow the economy and create more jobs.

I have in no way been advocating totally equal pay for all, or a lack of incentives for work and innovation. Nor have I suggested that the old USSR model worked better. But I guess when people cannot argue on the actual case, they have to put up straw men, buggy men and other half brained stupidities. All I am saying is that when inefficiencies and counterproductive incentives (not to mention stupidity and greed), gets our capitalist system out of whack and onto the wrong track, then government should intervene on behalf of “we the people” not only to ensure fairness but to ensure sustainable growth.

And no you don’t have to be drinking to understand what is fair and not fair, or realize the idiotic mal-incentives and inefficiencies of the system you live in. It’s called critical thinking (the opposite of just swallowing whatever Fox “news” is pouring into your stupid head. And that actually goes out when alcohol goes in, so maybe you can sober up and then we can have a fact-based discussion of what is wrong with the system and how to fix it.

I actually agree with you on many of the points about out of control pay to top executives, and the unsustainablity of the percent of profits going to employees. I just thought your tirade in the 3:54 pm post was more Trotskyish rant than a desire for a fact-based discussion on how to fix our system. It just seemed out of character for this blog where most posts are very well thought out. I apologize if I offended you by the drinking comment.

We may disagree on how to fix it, but lets give it a try. I promise no name calling or insinuations of your BAC. Deal?

I would say the first problem in our economy is in the first fact that 70% of our economy is based on personal consumption. That’s about $10 Trillion! What the heck are we buying? How does that produce wealth or increase our stock of capital? For the most part it doesn’t, especially when our consumption was increasingly being financed by debt. There was an interesting article in The Economist a couple of years ago examining if middle class income as a percent of GDP was really falling behind. They found it was but not nearly to the same extent as consumption increased.

Think about the “Glory Days” of the 50′s and 60′s. Households had one car, one TV (no cable), fridge, washer, dryer and one telephone line. Let’s look at today. The typical household has at least two cars, a flat screen in every bedroom and the living room with either cable or satelite, a land line and a cell phone for every member over 12, at least one desktop and probably a laptop too, internet subscription, ipods out the backside… In essence our problem is that we are a materialistic people that has taken the whole “keeping up with the Jones’s” to an extreme. Madison Avenue has convinced us of our “need” for all of these things; while Wall Street has made fortunes convincing us that it is all affordable and available right now. Combine this with a school system that doesn’t prepare students at all for their financial futures and this is what you get.

Did the bankstas prey on this desire and naievette? You bet they did. Should they? That is an ethics question. Tell me how we can expect people to act ethically when our public discourse only allows for moral relativism? Just a thought.

That leads me to a question that is bothering me lately. I took an entrepeneurship class in college taught by a local businessman. Each week he would bring in another local entrepeneur to speak about their experiences. He would always ask what they looked for when doing business with someone new. The answer was always the same: honesty. That maybe what broke down in our system. From the mortgage broker “fixing” an application to the ratings agencies. Everyone was just trying to make a quick buck. Who cares what happens as long as you aren’t the one holding the bag in when the music stops? The question that is bothering me is: Can our capitalist system work without honest brokers? Not that there haven’t always been liars and crooks, but there was always consequences to their actions. Not so today.

This is where the bailouts have failed us. The biggest failures were kept alive at the little guy’s expense. This is where I think you and I are in complete agreement. The fact that Congress and Bush and Obama have mortgaged each and everyone of our, our kids and grandkids futures to keep these companies afloat is reprehensible. I agree that if we want out of this mess, we could’ve borrowed and spent $7,000 billion a whole lot more productively and fairly. The average American is the one getting hurt. We are working less hours per week while having household costs continue to rise. Those that have credit card debt, and that is not a small number, are really getting crunched. Banks are cutting credit lines to what one has outstanding on his card while boosting interest rates. This not only takes away a needed “shock absorber” for the lower hours, but also screws up credit ratings. Rates can be as high as 30%. These banks have been outright given money from the government, “we the people” so they can keep charging people 30%. They run to us screaming that if we don’t save them there will be a catastrophe. How much worse would this have been for the average American if we didn’t mortgage our future with these bailouts? For the costs of the bailouts, we could have cut a check to each man, woman and child for $23,333.33 (assuming $7 trillion split among 300 million). Like that wouldn’t have jump started the economy. I know that my family of four could use an extra $100,000.

As Barry said in his book you can’t privitize the profits and socialize the losses. If you want a capitalist, free market system, then be willing to take the creative destruction that it dishes out from time to time. This is where we have gone wrong. Personally, I am willing to play in that system, even with its inefficiencies and so called unfairness. I am not for completely free markets though. To trust selfish people to act only in their best interest when the history of man proves otherwise, is foolish. This is where government regulation comes in. The goverment needs to create the arena, mark the boundaries of the field, tell us the rules, referee the game but accept the outcome of the game.

So DeDude in summation. Capitalism didn’t fail us, materialism did. We didn’t let capitalism dish out the fair and efficient punishment the dishonest, fools deserve and which we both desire. Wall Street made the materialist dream easy and within reach of everyone and then got in over their heads themselves. Government only made things worse by saving the enablers at the expense of the addicts.

Skysurfer; deal and peace. We don’t disagree on everything – and since I always fire back with the same kind of “bullets” that are fired at me, I will keep it very civile and sober.

I am not that worried about what fraction of our economy is consumption as I am about the type of consumption AND (as you) that the consumption (and economic growth) is based heavily on debt. Countries that have tried to build their economy on production for export have not done that great (they get choked by the increased value of their currency and/or their own attempt at keeping it down). Ultimately all economic activity is based on consumption, whether it is government services, private services, basic survival consumables or self-indulgencies (like the ones you so nicely listed). It’s just that in our selfindulgent culture the only thing people call consumption is the glutuny they personally can immerse themselves in.

Some of our disagreement is just semantics. I put Wall Street, Banksters and Madison avenue into one big pot of capitalists and call their private enterprise game capitalism. They were the ones who used their power over the corporate media to create the materialism that allowed them to rob us. Look at an old Leave it ti Beaver show and compare it to a MTW “reality” shows of spoiled brads engaging in absurd selfindulgence and showin off their “bling”. The messages of what a human is, and should be doing, are astonishingly different. Look at the “just pay the minimum” messages of the financial “educational” material provided for free to our schools from American Express. So Wall Street created the materialism that caused part of the problem. At the same time Wall Street is using its corpoarate media to sell ideas of “government is wasteful and cannot do anything right”, to weaken the only institution strong enough to counter their exploitation of the people. Even when privatizing government services give us truck drivers payed $500/day rather than soldiers payed $50/day to deliver supplies in Iraq, the little Wall Street slave who made these arrangements for his masters, gets re-elected as president. Absurdly enough he was re-elected mostly because people were afraid of “big government”. Similarly Wall Streets campaign against government have gotten people afraid of big government taking over their health insurance, and prefering private companies that will cancel their coverage as soon as they get a disease that cost some serious money.

The old system where the dishonest business was punished by its reputation, is only working if there is both information about honesty and an actual choice between using honest and dishonest suppliers. In most cases at least one if not both of those have disappered.

The problem is that the big Wall Street capitalist system only works when the destructive consequences of selfishness is harnessed by a strong government. But Wall Street used its power over the media and its ability to litteraly purchase the leadership it wanted in DC, to ensure that nobody interfered with its sucking dry the country and the consumer class. And none of these leaches individually will stop sucking to allow the organism they all live on to survive. In the end every one of them hope that they will have stashed enough millions away on some caribien island to have a great rest of their lives out there, as they watch the sad consequences of their actions on TV with a coconut martiny in one hand and the remote in the other.

I disagree with you regarding the 23K to every person. In a crisis situation everybody will save cash and/or pay down debt. So there would have been no increase in consumption from those payments. The economy would just have kept sinking, until everybody were unemployed and the only ones eating were those with their own veggie gardens or farm animals.

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About Barry Ritholtz

Ritholtz has been observing capital markets with a critical eye for 20 years. With a background in math & sciences and a law school degree, he is not your typical Wall St. persona. He left Law for Finance, working as a trader, researcher and strategist before graduating to asset managementRead More...

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